17 comments:

Friedman's speech was contained in the book; on balance, there was much less potential interference with his speech at the book signing as compared with hecklers disrupting Cantor's speaking engagement.

His speech being less substantially interfered with, Friedman makes a great rhetorical point about his heckler's repulsiveness, and connects it to economic activity by pointing to the need to free ride on a more popular product.

Not that I agree, but if the "local leftist" had any grounding in economics he would have countered that it's merely overcoming information asymmetry in the marketplace of political ideas.

In economics and contract theory, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other. This creates an imbalance of power in transactions which can sometimes cause the transactions to go awry, a kind of market failure in the worst case. Examples of this problem are adverse selection, moral hazard, and information monopoly. Most commonly, information asymmetries are studied in the context of principal-agent problems.

wv - "defato" = you are in fact fat, even though not legally classified as such... yet.

Cancelling because you are afraid someone will try to disrupt your speech? What a wuss.

One shouldn't allow the threat of a heckler's veto to be more effective than the real thing. (Now if Cantor were in the Senate, that would be different, because there, they allow the threat of a filibuster to be more effective than the real thing.)

"Cancelling because you are afraid someone will try to disrupt your speech? What a wuss.

One shouldn't allow the threat of a heckler's veto to be more effective than the real thing."

Assuming someone will try but not succeed and that the threat of a heckler's veto is an empty one.

Yes, we all know that the only thing that was going to happen was, during the response pauses built into a speech for applause, the hecklers were going to yell out some political slogans. Then they'd shut up while Cantor gave the rest of his speech.

That's why the unnamed English prof at the school could say how sad it was that people fear criticism and contrary opinions, because when the prof pauses in her classes for response, she welcomes a variety of opinions and then continues with her lecture.

Friedman was not giving a speech, he was doing a book-signing at a bookstore. I was astonished at the time that the bookstore did not escort the heckler outside and tell him he could scream and shout all he wanted on the public sidewalk, but not on private property inside. After all these years, I'm less astonished, but just as disgusted.

@EDH--Not to be combative, but I think you've found a poor definition of info asymmetry and an even worse application of it.

What private information is held by any of the parties in question at the bookstore that cannot be credibly conveyed to any of the other parties? None, AFAICS.

In general, I think people should be very careful in deploying the assym. info. argument. In Akerlof's original article he used it to explain why there's no market for used cars. That should make clear why the argument is problematic.

In a nutshell, lots of people who have supported and camped with Occupy Seattle are getting fed up with a radical, anti-cop contingent of protesters. These folks who have contacted us—including some who slept on the pavement and risked arrest—say these agitators are swooping into meetings and forming a contingent that uses incendiary rhetoric aimed at police (not at banks, not at corruption, not at Wall Street), thereby driving away fellow demonstrators.

You know, this perfectly explains why there gets to be such a hodge-podge of causes at certain rallies. I was told that there was a lady down here in Albuquerque with a "Don't club baby seals" sign. It explains why communists would show up at anti-war marches.

Chip S. said... What private information is held by any of the parties in question at the bookstore that cannot be credibly conveyed to any of the other parties? None, AFAICS.

I'm not sure "cannot be conveyed" is imperative for an information asymmetry to exist; it's simply that one party is without information known by the other party before making a decision.

From the "local leftist's" standpoint, in the "marketplace of political ideas," the gloss of free market prosperity in Chile touted by Friedman denied his readers the full context of the cost in human rights resulting from Pinochet's rule.

As a result, Americans voted to support a U.S. foreign policy that they otherwise might oppose, but for their lack of information about the secret human rights abuses in Pinochet's Chile. Remember, that's why they called it the Secret Policeman's Ball.

FROM CHILE...AN EMBRACE OF HOPE

Never seen in the US!

Amnesty had wanted to visit Chile as part of the "Human Rights Now" tour in 1988 - but the presence of General Pinochet's dictatorship prevented that. In 1990, Pinochet was finally banished and Amnesty helped the people of Chile celebrate with a two-day music festival in the very stadium where Pinochet's thugs had once imprisoned and murdered Chilean citizens. The festival was headlined by an eclectic lineup including Sting, Peter Gabriel, Jackson Browne, Sinead O'Connor, Wynton Marsalis, Ruben Blades and a newly-politicized New Kids on the Block. Never on home video or DVD anywhere in world. (Courtesy of Amnesty International - USA)

Arguably, the "local leftist" was also attempting to "correct" that information asymmetry by "credibly conveying" that information to the voting public through his protest of Friedman's book signing.

EDH said: I'm not sure "cannot be conveyed" is imperative for an information asymmetry to exist; it's simply that one party is without information known by the other party before making a decision.

No, credibility is the key to the entire "asymmetric information problem."

The original example of the problem (which helped George Akerlof get his Nobel) was this: Suppose the average true value of all used cars of a certain model and vintage is $8K. Suppose further that all car owners know the true value of their cars. No one who owned a car worth more than $8K would offer it for sale, so--in the absence of any credible information about a particular car offered for sale--the logical inference is that the car is worth less than $8K, so no buyer is willing to pay that price.

Continue this logic and you'll find that no market in used cars can exist. This is obviously absurd, but why? The main reason is that the true value of a used car can be assessed by a reliable third party, about as well (or better, actually) than it can be assessed by the seller. You can always have car inspected by a mechanic you trust before buying it. Also, used-car dealers engaged in repeated purchases and sales worry about the damage to their reputations from selling lemons, and are able to assess used-car values fairly well. The essential point is that the seller wants to reveal his private information, because if he doesn't then potential buyers will be suspicious. The value of credible information from sources like carfax is why sellers will voluntarily provide it to potential buyers.

Now, it's true that a leftist screaming about Friedman and Pinochet cannot convey reliable information about either of those topics, but the leftist's attempt to free-ride off Friedman's book signing isn't going to change that.

Chip S. said...Now, it's true that a leftist screaming about Friedman and Pinochet cannot convey reliable information about either of those topics...

Why not? How about John Cleese and Monty Python? Sting? New Kids on the Block?

Moreover, what makes you think the problem of information asymmetry is necessarily restricted to private transactions involving zero-sum exchanges of depreciated assets between utility-wealth maximizing actors?

Akerlof's "The Market for Lemons: Quality Uncertainty and the Market Mechanism," is the special case of a theoretical model with an "interaction between quality heterogeneity and asymmetric information," which produces the anomalous result that the party with the better information endowment suffers the disadvantage.

Asymmetric information applied to U.S. voter political choice and human rights in Chile, however, would involve instead a model of altruism and externalities -- not the direct utility maximizing self interest of the kind you find in zero-sum used car transactions.

Chip S. said... EDH, Go ahead and stay ill-informed on this topic. I don't really care. You appear to know as little about Chile as you do about asymmetric information.

Never viewed it as a matter of proving anything about each other's knowledge, but I endeavored to explain and support what I still think was a valid assertion. I'm comfortable letting the thread's readers draw their own conclusions about our respective arguments.